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Defining the Temporary Workplace

For most taxpayers getting to and from work—no matter how arduous,
frustrating or costly their daily commute—is a nondeductible personal expense.

Taxpayers whose residences are their principal places of business,
however, may deduct daily transportation expenses between a home
office and other temporary or regular work locations related to their
trade or business. A home office qualifies as a principal place of
business even if it is used only for administrative or managerial
activities.

In the past, the IRS defined a "temporary" location as any
location at which the taxpayer performed services on an irregular or
short-term (days or weeks) basis.

In Walker v. Commissioner (101 TC 537, 1993), the
Tax Court held a lumberjack could deduct daily transportation expenses
even though his only regular place of work was his home and the home
did not qualify as his principal place of business.

Taxpayers following Walker could thus deduct the costs of
commuting to temporary work sites even if they didn't have a home
office.

In revenue ruling 99-7 (1999-5 IRB), however, the IRS has redefined
the meaning of "temporary employment" illustrated in Walker.

According to the new ruling, employment is temporary only if

It is realistically expected to last (and does, in fact, last)
for one year or less.

It is initially expected to last for one year or less, but at some
later date it becomes apparent the work will exceed one year (the
work is temporary only until the date of the changed expectation).

If employment at a certain location is realistically expected to
last for more than one year and is completed in less than a year, the
employment is not considered temporary under the new ruling.

The following is an example of how the new definition might be
applied. A foreman is asked to oversee a new production process at
another plant for a temporary period. She normally commutes to work by
bus, but the new plant is 40 miles away. She drives to and from the
distant site for nearly four months until the project is completed.

Prior to the issuance of revenue ruling 99-7, this probably would
not have been considered a qualified trip. Under this ruling, however,
it qualifies as a deductible transportation expense.

What would happen if the foreman's work at the temporary site had
lasted 13 months?

According to the new regulation, the foreman would not be able to
deduct her travel expenses after she realized her assignment would
last more than one year. Her expenses would not be deductible from the
fifth month or the tenth month, or whenever she knew her work would
exceed the year. Her expenses prior to the change in her expectation
would remain deductible.

Observation. Taxpayers who work out of their
homes, but whose homes, like Walker's, do not qualify as principal
places of business, may not be able to deduct transportation expenses
under revenue ruling 99-7. In order for a home office to qualify, the
taxpayer must conduct substantial administrative or management
activities at the location.

Consequently, CPAs should advise their clients to perform
administrative tasks in their home offices or to open another regular
place of business (shop) outside of their homes. Doing so will enable
these taxpayers to deduct the expenses of commuting to work locations.

The results of the 2016 presidential election are likely to have a big impact on federal tax policy in the coming years. Eddie Adkins, CPA, a partner in the Washington National Tax Office at Grant Thornton, discusses what parts of the ACA might survive the repeal of most of the law.